Shares of Deckers Outdoor (DECK -6.01%) dropped on Thursday after an analyst downgraded their outlook for the stock. Coincidentally, the company released a product update with its popular Hoka brand, but it didn’t move the needle. As of 10:15 a.m. ET, Deckers stock was down 7%.
A new shoe line didn’t encourage investors today
Deckers stock has performed incredibly over the last five years, rising over 400%. The success of its Hoka brand is a big part of this. In its fiscal third quarter of 2024 (which ended in December), Hoka sales surpassed $400 million and accounted for nearly 28% of the company’s total sales.
This morning, Deckers announced its latest Hoka running shoe line, the Skyward X. It could help the brand keep growing, but that’s not what investors are thinking about this morning.
Rather, investors are thinking about comments from Bank of America analyst Christopher Nardone. Previously, Nardone recommended buying Deckers stock but now he’s shifting his outlook to more neutral, according to StreetInsider. This is causing some investors to rethink their positions.
Deckers stock has gone up really fast
In fairness, Deckers stock is up over 60% in just the past year, which is a red-hot performance for a single year. This rapid price appreciation has pushed the price-to-sales valuation of Deckers to over 5. For perspective, it’s traded at about half of this valuation over the last five years.
DECK PS Ratio data by YCharts
Deckers owns shoe brands that are growing in popularity and the business turns a nice profit. But its valuation is reaching historically abnormal levels so there may be some validity in Nardone’s more neutral near-term outlook.
Longer-term, Deckers’ success may be tied to its ability to continue expanding in international markets. Right now, its international business is about half of the size of its domestic business. But sales in international markets are growing at a faster pace, which is encouraging.
Deckers is expected to report quarterly financial results next month.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.
